Thom Calandra

Several see short-term turbulence in stocks

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SAN FRANCISCO (CBS.MW) -- Market timers and strategists are all suggesting a difficult stock market for the remainder of the summer. I suggest sitting tight.

Kevin Lane at Technimentals Research says, "Major U.S. indices are touching trend lines while internals soften and historically August seasonality trends turn down (performance wise). Since we think prices will be higher by year's end, trading the possible corrective activity depends on personal trading style." Translation? Hold your course if you're willing to live with a rough-and-tumble August and September. Put on your trading cap if you want to protect some of the money you've made since the small-cap rally
SML,
+4.39%
began in early March. See more market outlook comment in MarketWatch's August Trading Strategies special section.

Richard Dickson at Lowry's Reports says, "Short-term signs of selling pressure appear to be moderating. The 30-day moving average of NY Down Volume, which had been rising sharply from late May, has begun to flatten, showing virtually no gain over the past couple of weeks. The 30-day moving averages of Points Gained and Up Volume, though, have continued to fall, producing the slight downward bias evident in the net figures for each indicator. However, the action of these 30-day moving averages is not typical of a market undergoing the sort of distribution that usually serves as a precondition for a sustained market decline. The major problem with the market appears to be a lack of demand. A sharp break below the current trading range could bring about the lower prices that serve as the catalyst for a resurgence in demand that carries the market to new recovery highs."

Ian McAvity at Deliberations on World Markets notes, "August-October is the period of seasonal vulnerability for the stock market that troubles me most. I've previously cautioned the stock market might initially react to a rise in bond yields as a bullish presumption that deflationary forces may have abated, and recovery of some degree might be under way. That's unfolded, but the magnitude of bond price losses is such that I suspect a negative impact on stocks sooner rather than later. Somebody somewhere is taking an awful beating in U.S. Treasury paper in the past six weeks. It may be dollar related, or toxic derivatives."

James Turk of GoldMoney.com says, "I suppose that by looking at the gold price only from 1980 to today, one would have to conclude that gold has been in a bear market. By looking at the entire chart from gold's bull market beginnings in the 1960s, it is clear that gold has not been in a bear market since 1980.Rather, it has been simply consolidating the spectacular gains it achieved from 1967 to 1980. Gold has broken above a downtrend line going back to 1980. Consequently, this action establishes the upper line of the flag as gold's next price target, which is about $700 per ounce. Gold closed July at $354.70. Thus, my interpretation suggests that the gold price is about to double, but even more importantly, gold remains in a long-term bull market. Only time will tell whether I'm right. But in the meantime, we do know why gold has been climbing since 2001 and is going higher still. It's the same reason today that drove gold higher in the 1960s and 1970s. The dollar is being debased."

Adrian Day at Global Analyst says, "Both the U.S. budget and current account deficits are around 5 percent of GDP, very close to record highs. With monetary policy continuing to be very easy, foreign capital will buy U.S. assets -- and fund those deficits -- only when the currency is cheap, and certainly not because of high interest rates. Previously, any sharp increase in the deficits, relative to GDP, has led to a collapse in the dollar within a year or two."

The Calandra Report

Coming this week: The latest issue of subscription service The Calandra Report. In the cards: why China, in the eyes of one billionaire, is the surest place to make big money. Thom Calandra sees a big fourth quarter for gold and other metals stocks. He also is forecasting an imminent rise in the shares of one energy company. And he sees continued gains this year for several small-cap companies, both on and off the Internet. See:The Calandra Report.

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